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Matthew McRae, CTO of Vizio

If you've shopped for a TV in the past couple of years, chances are you've heard of Vizio. After all, the company, a decade old this year, has been holding its own in the US TV market against global giants like Samsung and Sony while at the same time expanding into new products like PCs and tablets.

Impressive no doubt, even more so considering the company does all this with just 400 employees. At $3 billion in annual revenue, this translates to about $7.5 million per head, a number that's over ten times that of Sony. That's an amazing degree of productivity, especially for a company that has in no way taken the easy path of shipping me-too boxes, but instead has been one of the most progressive in adopting new technologies for the TV market such as new interfaces and smart TV.

Leading the charge on the technology front for Vizio is Chief Technology Officer Matt McRae. McRae, a graduate of both Penn's engineering and business schools and someone with over 20 patents to his name, holds responsibility for Vizio's engineering, product and marketing teams.

I chatted with Matt this week about their TV efforts, including how the smart TV market is doing a few years in, as well as other topics such as emerging interfaces and social TV. The full conversation can be heard by clicking here, and below I have a few highlights of our conversation.

90% Connected and Streaming

According to McRae, while the smart TV market has experienced growing pains, it's one of the fastest growing areas for the company, with most of the TVs sold by Vizio not only having Internet connectivity, but actually being connected. In fact, he said that almost 90% of the TVs sold over this past holiday weekend have already connected to the Internet and are streaming content.

It (smart TV) is still the most exciting part of what is happening TVs. If you look at the evolution fo TVs, ever since we went to digital and high definition, the next thing that's really starting to impact consumers is smart. .... We're at the point three years in where Vizio is selling a majority of TVs are not only connectable, but being connected to Internet and are being used on a weekly basis.

McRae pointed out that while the top apps tend to be video centric - with the usual suspects Netflix and YouTube logging the most hours of the bunch - that they were also seeing connected TVs being used as streaming music players.

"The top two apps are Netflix and YouTube, which is probably expected... The second usage model underneath that (video) as far as number of hours spent is music, which was a surprise to use a few years ago. Apps like Pandora, as example, are used by some households 10 to 20 hours a week where people will turn on TV, load up some music, and they'll let it run for a few hours."

McRae went to on to say they are seeing growth in some other content areas such as video games and video conferencing like Skype, but the clear leader in hours is streaming content, which includes both video and music.

Smart TV Recurring Revenue 'Becoming Significant'

I've written in the past about how smart TVs enable a new business model for TV OEMs in a small-margin TV business, so I asked Matt about if he sees recurring revenue on connected TVs in the form of service revenues as key part of their business model going forward. According to him, it already is.

"Over the last 3 years, the layer we've added on top of that (hardware) is now an ability to leverage that hardware platform and installed base as a distribution platform for partners that care to get into people's living rooms... So we do have different agreements with different partners are rev shares and bounties and that's becoming a significant revenue and profit stream as we look forward."

TV Commerce Feels Forced Today

We talked about other potential revenue models such as interactive advertising, and I asked Matt what he thought of TV commerce given they have both first and second screen offerings.

He felt it was something that could work in the future, but that it's ready yet.

"it feels forced in alot of respects, and it's not well integrated with the content yet. If our choice is to shove something in front of the consumer and that makes them think it getting in the way of the content they are watching, it's not worth doing. We'll always take that conservative approach and make sure it's something that's truly adding value."

I invite you to listen to the full conversation to hear McRae's thoughts on social and second screen TV, new interfaces such as motion sensing and voice, and what living room technologies he's most excited about for 2013 and beyond.